Government Websites, Real Estate Agents, A Drive around the Block, And More Ways to Find REO Homes in Your Area

Here’s a riddle for you: What do government websites, real estate agents, and a drive around the block have in common?

Give up?

They’re all great ways to find REO homes in your area. If you’re in the market for real estate, either as an investment or a residence, REO (which stands for “real estate owned” also known as “bank owned”), homes can offer you a deal, but without the hassle of dealing with a foreclosure auction.

To figure out the best place to find REO homes, we did a lot of digging and looked at banks, the U.S. Marshals, auction sites, and government-sponsored enterprises, as well as talked with Chris Barnett, a real estate agent in Birmingham, Alabama, who specializes in REO properties, to give you this list of the 10 best ways to find REO properties in any area.

What is an REO home?

Real estate owned, or REO, homes are a result of the foreclosure process, which varies from state to state. If a homeowner is unable to make their mortgage payments, ultimately the bank can foreclose on the home.

Once the home is foreclosed, it will typically go up for auction. This happens in one of two ways: through the local court or sheriff’s office in a judicial foreclosure, or through the mortgage company in a power of sale or non-judicial foreclosure. If the home doesn’t sell at this stage, then the bank will take possession of it, and it becomes an REO home.

The bank will then work with a listing agent to list the home on the MLS. These types of homes can be a great way to invest in real estate and can result in a good deal and a higher return on investment (ROI).

In 2022, due to eviction moratoria throughout the coronavirus pandemic and issues with courts being shut down at different times, REO properties have been difficult to come by. Barnett says: “typically where we would have 20 to 30 properties a year just from this one bank, we’ve had two that we’ve been dealing with, and they’ve been working on them for a year and a half trying to get the foreclosures done properly.”

This backlog of property means that inventory for REO properties is low. But as foreclosures eventually move forward, REO inventory should go up.

So, now you’re probably wondering how to find REO homes in your area? We’ve got you covered.

How do I find REO homes in my area?

There are a number of different ways to find REO homes, so let’s break them down.

1. Find an agent who specializes in REO properties

Finding an agent who specializes in REO properties can give you an advantage throughout the process.

Barnett is one of these agents. He got his start selling REO homes and continues to work with a bank, helping people buy the properties that it owns.

Often, REO properties are sold “as-is,” and many need work before they can be sold again or lived in. When he works with seasoned investors, Barnett discusses the risk and the scope of the work that the property needs. For people new to REO properties, he says that he takes a slightly different approach.

Especially if his clients are unfamiliar with REO purchases, he tries to explain certain possible challenges upfront: While some REO homes may be financed with a conventional loan, others may be more distressed and need to be purchased in cash, or potentially through a rehab loan such as a FHA 203(k) loan, a Fannie Mae HomeStyle Renovation loan, or a Freddie Mac CHOICERenovation loan.

An agent with REO experience will be able to explain what it means if the HVAC is missing or the roof is leaking, guiding you through things you will have to fix or deal with. Barnett, for instance, will walk the property with clients (or via video) to identify things that would need to be repaired or renovated.

2. Use the MLS

You’ve probably searched Zillow or realtor.com or even individual real estate agent sites for homes for sale — or just to look at the island property you’ve been dreaming about buying when you win the lottery. MLS (multiple listing service) listings are distributed to these public websites, but real estate agents have access to additional MLS data, which includes details that are hidden from the general public, such as information about who owns the house.

Using this access, your agent might be able to identify REO properties that are owned by a bank or other entity and help you pursue a purchase.

3. Track a foreclosure property

Some real estate portals will list pre-foreclosure and foreclosure properties as well as homes currently for sale.

You can attend the auction and purchase the property (though keep in mind you’ll likely need all-cash to do so!). If you want to hold out, and the house doesn’t end up selling, you can then watch for it to come up as an REO property. This is a good way to approach the purchase if you don’t want to deal with the foreclosure process.

4. Go to an auction website

Auction websites, like auction.com, may have a dedicated section to bank-owned properties. Auction.com boasts over 7,800 bank-owned properties that you can browse by entering your preferred location and then using the “asset type” menu to search for bank-owned properties in that area.

5. Head straight to a bank’s website

Banks, especially larger banks like Bank of America and Wells Fargo, will have a dedicated portion of their website dedicated to the REO properties they are trying to sell. They also work with listing agents to list the property, and these agents can help walk you through the process if you find one you want to buy.

6. Search government foreclosure sites

If you’re in the market for a property that has been seized and forfeited due to violation of federal laws that are enforced by the US. Department of the Treasury, then this website is the place for you! And the proceeds for any sales go to the U.S. Treasury Asset Forfeiture Fund, which helps support law enforcement efforts as well as providing restitution to crime victims.

The U.S. Marshals Asset Forfeiture Program is another place to search for REO properties. This program also helps with victim compensation and restoring property to victims…and may offer you a deal. You can also browse for other items for sale if you’re in the market for more than just a house.

If a bank fails, the Federal Deposit Insurance Corporation (FDIC) will often take control of the bank’s assets, either selling them to another bank or selling them to someone else — maybe you! On the FDIC’s Real Estate and Property Marketplace, it sells real estate retained from failed banks.

Apparently, it’s possible to buy a home from the U.S. Department of Housing and Urban Development for one dollar. This may not be available to people as an investment property, and at the time of this writing, there aren’t any available. But it is a way for families with low to moderate incomes to purchase a qualified HUD-owned home. HUDHomes also lists HUD-owned homes for sale.

HUD also gives links to other places where you can find single-family homes for sale though other federal agencies, including the IRS, the Real Property Utilization & Disposal site of the U.S. General Services Administration, and the USDA. Some of these sites also include multi-family housing, land, and commercial real estate.

7. Get to know Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac are government-sponsored enterprises that buy loans from banks, sometimes holding onto them, and sometimes repackaging them in mortgage securities and selling those on the secondary market.

When a home loan that Fannie or Freddie is holding goes into foreclosure, and the house doesn’t sell at a foreclosure auction, those Fannie Mae- and Freddie Mac-owned homes are then sold through the sites HomePath and HomeSteps respectively.

8. Pay for a specialty site subscription

Sites like RealtyTrac and HUDHomesUSA provide a database of foreclosure properties. You can use these sites to find properties in foreclosure and then track them to see whether they sell or later become REO homes.

9. Search public records and check for sheriff’s sales

Your local sheriff’s website should have a space that lists upcoming sheriff’s sales, which can include foreclosure properties that could become REO properties if they don’t sell — and if you’re wondering if I just spent 15 minutes looking at sheriff’s sales in my county, the answer is “yes.”

9. Take a drive through town

If you want to get really proactive, you can drive around town and look for homes that look abandoned or vacant. Then you can do some digging to find out who owns the home using the county’s website, though some are easier to use than others.

Some apps like onX, which is geared towards outdoor adventures, will also give you a property owner’s name.

Once you know the owner’s name (which will sometimes be the bank), you can try and figure out the status of the property and keep an eye out for it to become foreclosed on or become an REO property.

10. Ask around and put out some feelers

Sometimes, the best tool is your existing network. If you let people know that you’re looking for an REO property, they may hear some information that they wouldn’t normally pay attention to and be able to give you a lead.

You can also work with a real estate agent and let them know what you’re looking for. If they already work with a bank, they can really help you out, or they may be able to do some of the legwork for you.

Found your REO dream home? Here’s what to do next

The first thing you should do when you decide to purchase an REO home is to work with a qualified agent who can walk you through the process and help you understand what you’re getting — and what, if any, repair or renovation work will need to be done. If you’re buying the property as an investor, an agent can also help you work through the possible return on investment.

After you’ve found a property, it’s important to get an inspection. Even if you’re purchasing the property “as-is,” an inspection will let you know exactly what you’re getting into. It’s also important to get a title review to check to see if the title is clean, and strongly consider purchasing title insurance. Often, REO homes come with a clean title, but it’s important to double-check so you’re not surprised.

If you’ve bought homes before, it’s important to understand that when you’re purchasing an REO home, the bank is the owner, so the process may be a little different than a traditional homebuying process. Hold on and enjoy the ride, and you just might get a good deal.

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